Effect of the 800 square-metre regulations on tenants' claims to rent reduction in the retail sector

On 15 April 2020, Chancellor Angela Merkel and the state governors agreed on a common procedure to further contain the Covid-19 epidemic (“Covid-19 Decision”). Since then, the Covid-19 Decision has been and will be implemented in the federal states, and the existing legal bases for the operating ban on retail stores (“closure regulations”) are being amended accordingly. For the retail sector, the key message is that shops with a sales area of up to 800 m² may open again subject to certain conditions. However, the new size differentiation in the operating bans ordered in the respective closure regulations does not appear to alter the legal situation as regards possible claims to a reduction in rent. As a general rule, a reduction in rent therefore appears likely to be ruled out in future, too.

Content of the new regulations

In order to ensure social distancing in public, retail shops still cannot generally open unless they have been expressly excluded from the ban on opening. In the future, this exemption, according to the Covid-19 Decision, will also apply to shops with a sales area of up to 800 m², as well as to car dealers, bicycle shops and bookshops, irrespective of the sales area. They may reopen, but they must comply with rules on hygiene, access control and avoidance of queues.

Right to rent reduction

In our article on 19 March 2020, we explained that German law gives tenants the right to claim reduced rent only if a defect in the leased property prevents its use in accordance with the lease. Public-law restrictions establish such a defect if they are caused by the specific nature, usability or location of the leased property (Federal Court of Justice, NJW 1977, 1285). However, no defect exists if the restriction is due to the personal or operational circumstances of the tenant (Hübner/Griesbach/Fuerst in Lindner-Figura/Oprée/Stellmann, Geschäftsraummiete, 4th ed., chapter 14, para. 281). It is therefore necessary to differentiate whether the closure is ordered with regard to a specific property or whether the order relates to certain types of operation. Such a restriction is necessary because the tenant’s risk of use is not to be unjustifiably transferred to the landlord (Eisenschmid in Schmidt-Futterer, Mietrecht, 14th ed. 2019, § 536 BGB, para. 78).

While the current regulations to contain the Covid-19 pandemic have been strictly geared to the nature of a tenants’ business, this assessment now includes a size-related aspect, namely the size of the sales area. Business premises with up to 800 m² of sales area may now reopen, regardless of the business operation carried out therein.

Are the operations or the premises relevant?

However, the main assumption remains that the restrictions under public law are based on the type of business operations, and as a consequence to claim reduced rent is not possible. Therefore, businesses that provide essential services will be allowed to continue operating regardless of their size and regardless of whether they are located in a shopping centre, for example. The type of operations thus remains the first distinguishing criterion.

Only at a second stage will a distinction be made based on the size of the sales area. This type of distinction may appear to be premises-based, but it is not, in essence, due to the following considerations: premises larger than 800 m² are to be closed not because the property itself or the location of the property is a danger, but because the aim is to prevent too many people from gathering in one place at the same time, thereby further spreading the coronavirus. So the danger does not come from the property itself, but from the people who gather there because of the business operated within it. The restriction is therefore linked in particular to the nature of the use and the fact that people gather in the leased premises. The fact that people are in the leased premises is related to the operations and not to the property. There is therefore a temporary operating restriction which, although linked to property-related criteria, remains in effect operational. The relevance of the operations is also supported by the fact that the nature of the use of the leased property justifies the restriction of use under public law. The leased area may not be used in the manner agreed on by the lease only because the associated movement of the public is to be prevented.

In addition, the landlord (as the party responsible for the object) is not the subject of the operating ban. It does not have to close the property. Rather, the tenants themselves are the addressees of the restriction of use. They cannot operate their shops because that use is currently generally hazardous and does not benefit from an exception, such as being an essential service for the public.

Possibility to reduce the business area

The implementation of the Covid-19 Decision may vary from state to state. The question is whether large-scale retail shops of more than 800 m² in size should still open up if they reduce their business area to a maximum of 800 m². What is crucial here is how each state formulates the amendments to the closure regulations. If the “normal” sales area is taken as a basis, it will be difficult to find any implementing alternatives. However, it is always necessary to carry out case-by-case reviews in respect of the relevant rental unit as well as of the relevant regulations.

Conclusion

The Covid-19 Decision and the expected implementation by the states do not appear to change the legal assessment of any rent reduction requests by tenants. Please refer to our article. It appears that the economic risk will remain with the tenant. However, the Act to Mitigate the Consequences of the Covid-19 Pandemic of 27 March 2020 protects the tenant from eviction if it is unable to pay the rent due to the Covid-19 pandemic. Please also refer to our related article.

Possible options for implementing the 800 m² regulations must be examined on a case-by-case basis.